I am old.  I can’t even count the number of times I have heard well intentioned high level government officials tell us that they plan to make significant reforms in the US export control system.  Some government officials have told me that they are going to make the system so transparent and user friendly that they will put consultants like me out of business.

It’s been 26 years for me in this business and numerous government pledges to make things better.  As far as I can tell, I am still here and there is still a huge demand for assistance in dealing with the infinite number of problems that US export controls create for companies who try to comply with the rules.  Yes, this reform could be different.

So, I apologize (for a change) in advance for being the cynic as a good number of my peers spout enthusiastically about Defense Secretary Gates’ call for comprehensive reform to the US export control system.  Reform certainly makes sense.  Comprehensive reform could both promote national security and make compliance a bit easier for companies.

Comprehensive reform is highly unlikely.  Adjustments to certain aspects of US export controls might be the better-than-nothing result we should hope for.  And, changes to the current system that will create a lot of extra work for us without actually improving anything is what we should fear.   (Well, this last scenario will probably be a gold mine for my seminar and consulting businesses.)

On behalf of the Obama Administration, Secretary Gates called on Congress to make sweeping reforms.  There are four pillars of the reform:

1)      Create a single export control list.

2)      Create a single export licensing government agency.

3)      Designate a single agency to coordinate the currently dispersed export enforcement resources.

4)      Create a single, unified IT infrastructure for the US export control system

Items 1 and 2 seem to be the focus of most of joyful exporter discussions.  Item 3 seems to be closely related to item 2, except I guess the licensing agency and the enforcement agency could be separate agencies.  Item 4 is the least talked about and would be a relatively natural consequence of item 2.

I once again apologize in advance. Something I do now that I am old.  Here is my editorial view of the 4 pillars.

Single Control List

The number of export control lists we have is not as big a problem as a) the US imposing severe military product type controls on non-military products such as satellites; and b) the difficulty determining where an item is controlled.

We could get a single list and keep those two problems.  We could have bombs, satellites, and machine tools on the same list.  But if the new single list says that satellites are subject to the same ITAR-type requirements as bombs, we have we gained nothing.  If in the current structure, satellites were moved from the ITAR to the EAR but that move included creating EAR MLAs, TAAs, exclusion from the de minimis rule, etc. for satellites and the US continued to deny all licenses involving countries such as China, the list switch doesn’t benefit satellite companies.

READ THIS:  And, worse yet, unfortunately, a single list could increase the risk that items currently controlled by the friendly EAR rules could be made subject to ITAR type export controls.  Right now, the EAR structure is not set up to impose ITAR type controls on, let’s say, a super duper machine tool.  But if both military and commercial items exist in the same list, that implies that some items will be covered by ITAR type controls and some will be covered by EAR type controls.  So, if that machine tool is covered by regulations that include ITAR type controls, the government could much more easily  apply ITAR type controls to machine tools because the ITAR type controls would be part of the regulations that apply to that single list.

On to problem b):  A significant problem companies face is determining whether an item is controlled by the ITAR’s USML or the EAR’s CCL.  (The fact that companies might not like their commercial items being subject to ITAR-type controls is discussed above.)  For example, let’s say a single list merges renames ITAR Category XI as ECCN 6A881 and Category XII as 6A882 and puts those ECCNs into EAR Category 6.  If the new ECCNs use the words from the former ITAR categories, then the difficulty in figuring out whether something is controlled by 6A881, 6A882 or 6A003 is the same as the current problem of figuring out if something is Category XI, Category XII, or 6A003.

The difficulty in determining jurisdiction/classification is due to the words used in categories XI and XII—these words are sometimes ambiguous and open to interpretation, and perhaps that is a naturally unavoidable problem that a single control list will make neither better nor worse.  But a bigger problem might be the fact that DDTC is willing to say an item is controlled by categories XI or XII even if there are no words in the ITAR that says that item is controlled by either of those categories.  (The ITAR says DDTC can put USML controls on things not mentioned in the USML, and DDTC says the USML is “illustrative” of the things subject to ITAR jurisdiction.)  So, some exporters live in a world where DDTC imposes ITAR controls on a thing not described by the ITAR—that is a world where “white” might mean “black” so some companies live in fear that their product, that they treat under the EAR could be the next “QRS-11 case,” a case where DDTC imposed ITAR controls on a commercial aircraft part, just because it wanted to.  So, some companies err on the conservative side and treat items as being ITAR controlled because maybe DDTC would want to control them.  Since the new regulations that apply to the single list will be able to apply ITAR-type controls to some items and EAR-type controls to other items, the implications of making the wrong classification decision in the single list could be as serious as the current risk associated with making the wrong ITAR vs. EAR jurisdiction determination.

But, at least, if you classify an item as being 6A003 when, in fact, the government thinks it is 6A882, you won’t make the current mistake of getting an EAR license for an ITAR item.  But the new single list rules could still impose an extremely harsh penalty if you export a 6A882 item under the 6A003 rules—say you export a 6A003 item under an EAR-type license exception to China when in fact it is subject to ITAR-type military rules..  The penalties might be described in a different way, but why would we assume that mistake will be subject to lesser penalties?

Single Agency

If there is going to be a single control list, there probably will first have to be a single agency.  Some agency will have to take the lead in combining the control lists and the regulations that go around them.  If that single agency is transparent, customer-service oriented, efficient, and friendly, life will be good.  If that single agency is the opposite, life will be bad.  I won’t make any stereotypical statements about the current State and Commerce department export licensing agency strengths and minuses.

If I am a company who exports only items classified as 9A991 and EAR99, the last thing I want is a single agency and a single set of regulations because I am thinking that things can only get worse than they are now.  If I am a company who makes satellites, maybe I think a single agency can only make things better.  But, ultimately, it is the rules and policies that are the issue, not the number of agencies who administer them.  Sure, at the margin a single agency may improve consistency of interpretation (perhaps) and there might be benefits to the one-stop-shop export licensing agency.  But, it is ultimately the regulations, rules, policies and procedures that are the biggest issue, not the number of agencies involved.

And I didn’t even talk about the fierce turf wars that will be involved in deciding what government department gets to have the single export control agency.  The turf wars make take so long that by the time they are resolved, President Palin won’t favor the single agency idea anyway.

Conclusion

Don’t get me wrong. I support export control reform.  And I know that reforms, if possible, could enhance our national security and make compliance a bit easier for exporters.

Obama’s reform plan is based on good ideas.  I see the biggest challenge as being reforming the rules and policies that underlie the multi-control list and multi-agency structure we have.  So many organization, agencies, and people have a vested interested in the current rules and policies—maybe of those entities and people created the system we have now, and they did it for what they see to be good reasons.  And those entities, even at the lowest level of government, have an enormous capability to prevent real reform, even if the White House supports reform.  (Remember when President Clinton’s Administration announced the Defense Trade Security Initiative and decided to create the special bulk ITAR authorizations (“Global Project,” etc.)  for certain trade with our allies?  DDTC ended up setting up those bulk authorizations in a way that no company wanted to use them.  To prevent the White House from reforming the ITAR, DDTC had to implement the idea, but DDTC maintained the status quo by implementing that reform idea in a way that effectively blocked reform.  We did get the allies maintenance exemption out of that, which was a decent improvement, but not a sweeping reform.)

Export control reform is a great idea.  It is long overdue.  But pardon me for wondering if real reform is possible.  Who among you remember these labels for past reforms:  “China Green Zone,” “The Core List” (and “The Bikini List”), the Defense Capabilities Initiative, and the ever popular “Higher Fences around Fewer Products,” and, of course, the above mentioned “DTSI.”

When I use the word reform, I mean significant and meaningful changes to the current system, not just superficial changes made that result in marginal improvements.  Marginal changes to the system are not reform.  They are adjustments.  Adjustments can be good, and they are certainly possible.

At the end of the day, the White House is going to have to invest a great deal of time, effort and political capital into achieving its objectives, and even more if those objectives end up being beneficial for national security and exporters.  US companies will have to invest a great deal of their resources into this too if they want to get beneficial reform.  I think ultimately, most companies believe they have better places to spend their government relations budgets and ultimately the White House and Congress will decide they have better places to spend their time.  Many of those with vested interests in the current system do not have a better place to invest their time and resources and they are willing to fight a slow war of attrition against reforming what they have created.

I do not think significant reform will happen.

I hear that most people in Washington disagree with me.   Somebody just told me that Washington insiders are convinced real reform will happen.

I rest my case.

• APAC-Middle East
• Middle East-APAC
• APAC-Europe
• Europe-APAC
• Intra APAC
• APAC-India
• India-APAC

The only routing for ITAR controlled shipments is via the FedEx hub in China.

Don’t forget to always check the ITAR prior to booking a shipment to any of the above mentioned countries with FedEx.

More information:

• Surface Deployment and Distribution Command – August 4, 2009 Advisory

Don’t Tell Anybody-Expedited Treatment Available for ITAR Exports to Australia?

According to Kerry Clarke AO, in the Australian Department of Defence, the US State and Defense departments have agreed to give streamlined processing for exports to Australia under two new policies known as Expedited License Review I (ELR I) and Expedited License Review II (ELR II).

But, according to Kerry Clarke, the expedited processing might not yet be in operation and is “dependent on the continued implementation of D-Trade — [which] — the State Department hopes — to have fully implemented by the end of 2007. Until then, licence and TAA approvals may take longer than the 10 and 30 day target times, but hopefully less than the current approval times.”

(Not sure I agree with the hopefulness of Kerry Clarke.)

OK, so the bottom line appears to be that the expedited system might not be in operation yet and hopefully it will be up and running by the end of the year. (I personally am not going to use up my limited supply of personal hope hoping for streamlined processing. I plan to spend all my hope on hoping I win the lottery so I can retire to the mountains.)

Anyway, according to an Australian Department of Defence memo (see end of this article for a copy), here are the two expedited procedures the US and Australian agreed upon:

ELR I: Applicants will be approved/denied within a 10 day processing time and will be review only by the State Department (e.g., no staffing for Defense Department review). ELR I is available for license applications for (and “a very limited number of agreements”) when the applications meet both of these requirements:

1. Items that would be eligible for export under the Canadian exemption; and
2. Exports intended for the Australian Defense Department.

ELR II: If an application for a license or agreement is not eligible for ELR I, the US State and Defense Department “have agreed to work to a 30 approval time (rather than the current average of about three months).”

According to the memo, to make sure an application gets the benefit of ELR I or ELR II, the US applicant should indicate when its application qualifies for ELR I.

Part 2: Special Australian Dual National Policy

The same memo reminds Australian companies of the special US policy for Australian dual nationals. Applications for exports to Australia do not have to identify the second nationality of Australian dual-nationals company employees with a RESTRICTED security clearance and a need-to-know. In addition, the same dual-nationals do not have to sign a Non-Disclosure Agreement normally required for agreements. This policy applies only when the Defence Department is the ultimate end-user of a proposed US export. And, of course, this policy does not apply to dual nationals whose nationalities include a proscribed country listed in 126.1 of the ITAR (e.g., China, Vietnam, Iran).

So, if a US company is putting together a TAA, it does not have to list the second nationality for eligible Australian dual nationals and it does not have to get a signed Non Disclosure Agreement from the Australian dual nationals.

The Australian Department of Defence memo

Head Industry Division Russell Offices R2-5-C085
Ph: 02 6266 7489
Defence Materiel: equipping and sustaining Australia’s Defence Force

HID/OUT/2007/223

EXPEDITED U.S. PROCESSING FOR AUSTRALIAN LICENCES & AGREEMENTS

This letter provides information on further developments in United States (U.S.) export control arrangements affecting Defence and Australian companies. My previous advice (HID/OUT/2006/811) of 30 November 2006 outlined the agreement reached with the U.S. State Department under the AUSMIN Defence Acquisition Committee’s (ADAC) Technology Transfer Process Improvement Initiative concerning access to U.S. technology by Australian dual-nationals employed in Australian companies. Under the dual-national agreement, Australian dual-national company employees with a RESTRICTED security clearance and a need-to-know do not need to provide nationality information or a Non-Disclosure Agreement before being granted access to U.S. Controlled Unclassified technology. This does not apply to non-citizens, or to those whose dualnationality includes a country proscribed under U.S. International Traffic in Arms Regulations (ITAR) Clause 126.1 (eg, Cuba, Iran, Libya, North Korea, Syria, China and Vietnam). In such cases, State Department approval is required before access is granted. Importantly, this agreement applies only where the Defence Department is the ultimate enduser of a proposed U.S. export; a fact that can be verified either by Defence being a party to the agreement, or by the U.S. exporter making reference to the relevant Defence Capability Plan (DCP) project in the agreement submission letter. The latter should be supported by a letter from the relevant DMO project office or Capability Development Executive sponsor.

The latest development to which I now draw attention involves the streamlined processing of U.S. export licences and agreements for Australia, as follows:

a. Expedited Licence Review I (ELR I). The U.S. State and Defense Departments have agreed that Australian licences (and a very limited number of agreements) will be reviewed only by the State Department if the items to be exported meet the Canadian ITAR exemption criteria (ITAR 126.5) and the export is intended for the Australian Defence Department. The State Department will endeavour to approve such licenses and agreements within 10 days.

b. Expedited Licence Review II (ELR II). For licences and agreements for which Defence is not an end user or which do not meet the Canadian ITAR exemption criteria (most TAAs are not covered by the Canadian exemption), the U.S. State and Defense Departments have agreed to work to a 30 day approval time (rather than the current average of about three months).

The U.S. has also undertaken, where possible, to advise Defence of anticipated delays. The U.S. implementation of Expedited Licence Review arrangements are dependent on the continued implementation of D-Trade, an on-line U.S. export licensing system which currently applies only to unclassified licences, and not to agreements or classified licences. The State Department hopes to have D-Trade fully implemented by the end of 2007. Until then, licence and TAA approvals may take longer than the 10 and 30 day target times, but hopefully less than current approval times. To ensure that the potential benefits of ELR I and II are gained as soon as possible, Australian companies should request that U.S. companies flag in their licence or agreement submission letters whether a licence or agreement appears to be eligible for treatment under ELR I (as described above). In particular, the letter should specify whether a proposed export would be eligible under the Canadian ITAR exemption if it were destined for Canada. Where this is not the case, the letter should seek expedited 30 day processing under ELR II arrangements. While U.S. companies will be best equipped to determine eligibility under the Canadian ITAR exemption (which is based on applying ITAR Clause 126.5 to items controlled under the U.S. Munitions List), an indicative list of items likely to be covered by the Canadian exemption is attached to assist you in assessing whether a particular U.S. technology might be eligible for ELR I consideration.

Assistance and clarification of matters outlined above can be obtained from Mr Steve Hyland, Director U.S. Export Control Systems, by phone on (08) 8305 6370 or by email at steve.hyland@defence.gov.au.

Yours sincerely
Kerry Clarke AO Head Industry Division, DMO
15 May 2007

INDICATIVE LIST OF ITEMS THAT MIGHT BE ELIGIBLE FOR U.S. EXPORT CONTROL UNDER EXPEDITED LICENCE REVIEW I

The following list of items against U.S Munitions List categories that could be subject to the Canadian ITAR exemption, and thus eligible for ELR I. This list is subject to change by the U.S. Government.

Category II and III. Artillery and Projectiles

• Guns over .50 calibre, howitzers, mortars and recoilless rifles.
• Military flame-throwers and projectors.
• As well as:
  • Components, parts, accessories and attachments.
  • Ammunition, including components, parts, accessories and attachments (except for firearms).
  • Ammunition belting and linking machines (except for firearms).
  • Ammunition manufacturing machines and ammunition loading machines (except hand-loading).

Category IV. Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs and Mines (except those on the MTCR Annex)

• Launchers for these items (except MTCR Annex).
• Apparatus, devices, materials for the handling, control, activation, monitoring, detection, protection, discharge or detonation of these items (except MTCR Annex).
• Military explosive excavating devices.
• Components, parts, accessories, attachments and associated equipment (except MTCR Annex).

Category V. Explosives, Propellants, Incendiary Agents and Their Constituents

• Military explosives.
• Military fuel thickeners.
• Propellants for articles in Categories II and IV (except MTCR Annex) .
• Military pyrotechnics, except pyrotechnic materials having dual military and commercial use.
• All compounds specifically formulated for articles in this category.

Category VI. Vessels of War and Special Naval Equipment

• Warships, amphibious warfare vessels, landing craft, mine warfare vessels, patrol vessels and any vessels specifically designed or modified for military purposes.
• Turrets and gun mounts, arresting gear, special weapons systems, protective systems, submarine storage batteries, catapults, mine sweeping equipment (including mine countermeasures equipment deployed by aircraft) and other significant naval systems specifically designed or modified for combatant vehicles.
• Harbour entrance detection devices (magnetic, pressure and acoustic) and controls.
• All specifically designed or modified components, parts, accessories, attachments, and associated equipment.

Category VII. Tanks and Military Vehicles

• Military type armed or armoured vehicles, military railway trains, and vehicles specifically designed or modified to accommodate mountings for arms or other specialised military equipment or fitted with such items.
• Military tanks, combat engineer vehicles, bridge launching vehicles, half-tracks and gun carriers.
• Self-propelled guns and howitzers.
• Military trucks, trailers, hoists, and skids specially designed, modified, or equipped to mount or carry firearms, artillery or missiles, or for carrying and handling of ammunition.
• Military recovery vehicles.
• Amphibious vehicles.
• Engines specifically designed or modified for the above (except for those in the bullet beginning “military trucks”).
• All specifically designed or modified components and parts, accessories, attachments and associated equipment.

Category VIII. Aircraft and Associated Equipment

• Military aircraft engines, except reciprocating engines, specifically designed or modified for military aircraft.
• Cartridge-actuated devices utilised in emergency escape of personnel and airborne equipment (including airborne refuelling equipment) specifically designed or modified for use with military aircraft or engines.
• Launching and recovery equipment for military aircraft.
• Inertial navigation systems, aided or hybrid navigation systems, Inertial Measurement Units (IMUs), and Attitude and Heading Reference Systems (AHRS) except for those on the MTCR Annex.
• Ground effect machines (GEMs), including but not limited to surface effect machines and other air cushion vehicles, and all components, parts and accessories, attachments and associated equipment specifically designed or modified for use with such machines.
• Components, parts accessories, attachments and associated equipment (including ground support equipment) specifically designed or modified for the above or complete military aircraft.

(NB: The Canadian ITAR exemption does not cover complete military aircraft, helicopters, non- expansive balloons, drones and lighter-than-air aircraft that are specifically designed, modified or equipped for military purposes. It would also not cover developmental aircraft, engines and components.)

Category IX. Military Training Equipment

• Military training equipment including attack trainers, radar target trainers, radar target generators, gunnery training devices, anti-submarine warfare trainers, target equipment, armament training units, operational flight trainers, air combat training systems, radar trainers, navigation trainers, and simulation devices related to defense articles.
• Components, parts, accessories, attachments and associated equipment.

Category X. Protective Personnel Equipment

• Body armour specifically designed, modified or equipped for military use.
• Articles, including but not limited to clothing, designed, modified or equipped to protect against or reduce detection by radar, infrared (IR) or other sensors.
• Military helmets equipped with communications hardware, optical sights, slewing devices or mechanisms to protect against thermal flash or lasers, excluding standard military helmets. · Partial pressure suits and liquid oxygen converters used in military aircraft.
• Protective apparel and equipment specifically designed or modified for use with toxicological agents or equipment or radiation equipment.
• Components, parts, accessories, attachments and associated equipment.

Category XI. Military Electronics Electronic equipment specifically designed, modified or configured for military application, including:

• Underwater sound equipment to include active and passive detection, identification, tracking and weapons control equipment.
• Underwater acoustic active and passive countermeasures and counter-countermeasures.
• Radar systems with capabilities such as: search, acquisition, tracking, moving target identification, imaging radar systems, ground air traffic control radar (except for MTCR Annex).
• Electronic combat equipment such as: active and passive countermeasures, active and passive countercountermeasures, and radios (including transceivers) specifically designed or modified to interfere with other communication devices or transmissions.
• Command, control and communications systems to include radios (transceivers), navigation, and identification equipment (except for MTCR Annex).
• Computers specifically designed or developed for military application and any computer specifically modified for use with any defense article on the U.S. Munitions List. (MTCR Annex items are not included in the exemption.)
• Any experimental or developmental electronic equipment specifically designed or modified for military applications or specifically designed or modified for use with a military system (except MTCR Annex).
• · Electronic systems or equipment specifically designed, modified, or configured for intelligence, security, or military purposes for use in search, reconnaissance, collection, monitoring, direction-finding, display, analysis and production of information from the electromagnetic spectrum and electronic systems designed or modified to counteract electronic surveillance or monitoring (except MTCR Annex).
• Components, parts, accessories, attachments and associated equipment. Category XII. Fire Control, Range Finder, Optical and Guidance and Control Equipment
• Fire control systems: gun and missile tracking and guidance systems; gun range, position, height finders, spotting instruments and laying equipment; aiming devices (electronic, optic and acoustic); bomb sights, bombing computers, military television sighting and viewing units, and periscopes for articles in this section.
• Lasers specifically designed, modified or configured for military application, including those used in military communication devices, target designators and range finders, target detection systems, and directed energy weapons.
• First and second generation image intensification tube and first and second generation image intensification night sighting equipment.
• Inertial platforms and sensors for weapons or weapon systems; guidance, control and stabilisation systems; astro-compasses and star trackers and military accelerometers and gyros.
• Components, parts, accessories, attachments and associated equipment.

Category XIII. Auxiliary Military Equipment

• Cameras and specialised processing equipment therefore, photo-interpretation, stereoscopic plotting, and photogrammetry equipment.
• Military Information Security Systems and equipment, cryptographic devices, software, and components.
• Self-contained diving and underwater breathing apparatus controlled on the USML.
• Carbon/carbon billets and preforms.
• Concealment and deception equipment, including but not limited to special paints, decoys and simulators and components, parts and accessories.
• Energy conversion devices for producing electrical energy from nuclear, thermal, or solar energy, or from chemical reaction that are specifically designed or modified for military application. · Chemiluminescent compounds and solid state devices.
• Devices embodying particle beam and electromagnetic pulse technology and associated components and sub-assemblies.
• Metal embrittling agents.
• Hardware and equipment associated with the measurement or modification of system signatures for detection of defense articles (e.g., signature measurement equipment, prediction techniques and codes, signature materials and treatments, and signature control design methodology) .

Category XV. Space Systems and Associated Equipment

• Commercial communications satellites.
• Ground control stations for telemetry, tracking and control of spacecraft or satellites.
• Global Positioning System (GPS) receiving equipment specifically designed, modified or configured for military use, but for Australian Government end-users only.

Academic Institutions, in particular, were concerned about the regulations relating to fundamental research.  Under the new proposal it is noted that although fundamental research is not altogether exempt from statute-based export controls, it is to remain unrestricted to the extent possible.

In another provision, the revised proposal continues to place the burden of determining if a contract will generate or require access to export-controlled information or technology on the shoulders of the contracting officer.  The contractor also has the responsibility to comply with EAR and ITAR requirements.  Making both contracting officers and contractors responsible for following regulations is intended to decrease mistakes according to the DoD.

Several requirements relating to contractors were removed in the revised proposal in an attempt to eliminate potential conflicts with the EAR and ITAR.  The new proposal no longer requires that contractors awarded DoD contracts involving export-controlled information:

1. Maintain an export compliance program
2. Conduct training on export compliance controls
3. Perform periodic assessments
4. Develop an access control plan that includes badging and segregated work areas

Contractors would be directed to the EAR and ITAR to determine their compliance with existing requirements.

Importantly, eligibility for this exemption is not automatic. There are two main requirements: (1) the company must be on the list of authorized users in the DOD memorandum and (2) all proposed disclosures must be reviewed in advance by Judson Mason (judson.mason@jsf.mil) of the JSF Program Office. In addition, your disclosure must follow these guidelines, here quoted verbatim from the DOD memorandum:

1. Technical data provided under this certification will be limited to “build-to-print” and “build/design-to-specification data”. Related technical discussions must not result in the release of “design methodology”, “engineering analysis”, and “manufacturing know-how”. Refer to part 125.4 of the ITAR for definitions.
2. Technical data and or technical discussions are limited to potential foreign suppliers in NATO countries and Australia.
3. Technical data and or technical discussions are limited to unclassified information related only to defense articles that are not designated as Significant Military Equipment.
4. The JSF program office reserves the right to provide a designated escort official, US military or civilian government employee, at activities that require foreign participation.
5. No defense hardware or software will be shipped under provisions of this exemption.
6. Companies must comply with applicable ITAR requirements for use of 125.4(b)(1).
7. Companies named above [i.e. authorized users listed in the memorandum - ed.] must be eligible pursuant to IT AR 120.1.

The memorandum authorizing use of the exemption will expire January 31, 2006, but may well be extended prior to that date.

Probably the most difficult part of 125.4(c) is not the reams of treacherous definitions at the end, which could be the topic of a separate article, but the very first paragraph:  Exempt are “Defense services and related unclassified technical data . . . to nationals of NATO countries, Australia and Japan [and now apparently Bahrain and Sweden too], for purposes of responding to a written request from the Department of Defense for a quote or bid proposal.”   In other words, if DoD has issued a request for proposal (RFP) or a request for quote (RFQ), you can send technical data to close allies, e.g. a drawing for a subassembly, in order to generate a response to the RFP or RFQ.

But this leaves a number of compliance issues unanswered.  The language indicates that anyone can use this exemption, even if the RFP or RFQ isn’t directed at your company.  If, for example, a prime gets the RFP from DoD, and they in turn ask your company to participate, can you then export technical data to your NATO partner under this exemption?   Though nothing in 125.4(c) language explicitly restricts you, unofficial Government interpretations appear to conflict on this point, with some more authoritative voices arguing that only the company actually named in the RFP or RFQ can use the exemption.

What if you responded to the RFP or RFQ, got the contract, and now you would like to export technical data to determine which component supplier, NATO or US, can provide the best price?   Some exemption optimists would use the exemption in this context.   But unofficial ODTC and DTSA interpretations generally appear to list toward the notion that the exemption cannot be used post contract award.  The day before award you can use the exemption, the day after, you need a license.  In the real world, this seriously undercuts the usefulness of the exemption, because much of the technical collaboration occurs in the post contract stage.

Even if you jumped these initial hurdles, hold onto your technical data, as the ITAR drafters added a most vexing condition in the next sentence.  Exports under this exemption must “be pursuant to an official written request or directive from an authorized official of the US Department of Defense.”  Apparently the ITAR drafters casually cut and paste this sentence from the 125.4(b)(1) exemption, which says the same thing verbatim.  The language therefore indicates that in addition to an RFP and an FFQ, you need a written directive from DoD directing you to send the technical data to your close ally partner.

But requiring a separate written directive in addition to the RFP or RFQ doesn’t make any sense.  If you were one of the lucky few who has managed to obtain such a written directive, you wouldn’t even need this exemption, as you could use 125.4(b)(1) instead, and with less restrictions for both NATO and non-NATO countries.  As such, actual Government interpretations drift towards a different view.  According to some, this language was inserted to emphasize that the RFP or RFQ must be in writing, rather than spoken or hearsay, not that a separate written directive is required.  You wonder why the drafters just didn’t say “written” RFP in the first sentence and dropped the second sentence altogether

One of the wilder unofficial Government interpretations of the exemption is that it can be used only to send the actual RFP or RFQ from DoD and nothing else.   In other words, you cannot even use it to send technical data or defense services.  This interpretation is completely at odds with the plain language of the actual exemption.  The exemption has reams of definitions of the types of technical data and defense services that can (or cannot) be sent under the exemption, all of which are virtually pointless parameters if you could only send the actual RFP or RFQ.

The export compliance community would probably welcome clear written official guidance from ODTC on 125.4(c), expecially given the confusing language and all-over-the-map unofficial guidance.  Presuming this will not happen, the following is probably a reasonable, but not guaranteed, approach:

1. Use the exemption to send technical data and defense services if your company is named in a written RFP or RFQ from DoD.
2. If your company is not named in the RFP or RFQ, you must obtain a separate DoD written directive, and in that case, you could use the 125.4(b)(1) written directive exemption.
3. Use the exemption in the pre-contract award stage only.  The technical data and defense services must obviously relate to the RFP or RFQ and fall within the definitional parameters of 124.5(c)(1) – (6).

• DOD has $30 million in funding to use over the next three years to achieve these 5 objectives:
• Establish a common electronic interface between industry and government;
• Improve the quality of reviews that protect military capabilities;
• Improve and standardize computer systems among US Government players in the license review process;
• Decrease license processing times; and
• Ensure that the electronic license submission and review system is secure.

Exporters and reexporters certainly can hope that this DOD initiative will bring increased efficiency and decreased license processing times. It remains to be seen if the other US Government agencies involved in the licensing process agree with the goals and objectives of USXPORT.